Operating income was $178 million, compared with operating income of
$745 million in 2013.

Net loss was $241 million, or $0.52 per diluted share, compared with net
income of $274 million, or $0.59 per diluted share, in 2013.

“When we raised the price of Prime membership last year, we were
confident that customers would continue to find it the best bargain in
the history of shopping. The data is in and customers agree — on a base
of tens of millions, worldwide paid membership grew 53% last year — 50%
in the U.S. and even a bit faster outside the U.S.,” said Jeff Bezos,
founder and CEO of Amazon.com. “Prime is a one-of-a-kind,
all-you-can-eat, physical-digital hybrid — in 2014 alone we paid
billions of dollars for Prime shipping and invested $1.3 billion in
Prime Instant Video. We’ll continue to work hard for our Prime members.”

Highlights

Amazon announced Prime Now, a new service offering paid one-hour and
free two-hour delivery on tens of thousands of daily essentials via a
new mobile app. The service is currently available in Manhattan and
will expand to other cities this year.

Amazon introduced Prime Photos, providing free unlimited photo storage
in Amazon Cloud Drive. Prime members now have a simple, secure place
to store their existing collections of photos, automatically upload
new photos as they are taken, and access them anytime, anywhere, at no
cost.

Amazon introduced Fire TV Stick, bringing the same experience
customers love about Amazon Fire TV — ease of use, great performance,
and vast selection — to a smaller and even more affordable device.
Fire TV Stick plugs into the HDMI port on an HDTV and provides instant
access to movies, TV shows, music, photos, apps, and games.

Amazon introduced Echo, a new category of device designed around voice
recognition. Echo is hands-free and always on — customers can ask it
for information, music, news, and weather from across the room and get
results or answers instantly. Echo uses far-field voice recognition
with an advanced array of seven microphones to clearly hear around the
room, and has advanced audio design that includes dual downward-firing
speakers that produce 360˚ omni-directional, room-filling audio.

The critically-acclaimed Prime-exclusive series, Transparent,
received two Golden Globes. Transparent is the first series
from a streaming video service to win a Golden Globe for best series.

Amazon Studios announced it will begin to produce and acquire original
movies for theatrical release and early window distribution on Prime
Instant Video. Production will begin in 2015 with the goal of bringing
a dozen original, prestige movies to customers each year.

Amazon debuted its first pilot season of 2015, which is available
exclusively on Amazon Instant Video in the U.S., U.K., and Germany.
The new pilots include Cocked, Mad Dogs, The Man in
the High Castle, Point of Honor, Down Dog, Salem
Rogers, and The New Yorker Presents,as well as six
new kids pilots. All ten episodes of the highly-anticipated dramatic
comedy series Mozart in the Jungle premiered on Prime Instant
Video in the U.S., U.K., and Germany. In addition, all ten episodes of
the drama series, Bosch, will premiere in February on Prime
Instant Video in the U.S., U.K., and Germany.

Amazon Studios announced it will produce the first television series
from Oscar-winning director and producer Woody Allen, which will debut
exclusively on Prime Instant Video in the U.S., U.K., and Germany in
2015. Untitled Woody Allen Project has received a full season
order and will be written and directed by Allen.

Amazon launched the Kindle Store in the Netherlands, offering over 3
million titles in many languages, over 700,000 Kindle exclusives, and
more than 20,000 titles in Dutch.

AmazonFresh expanded to Manhattan and Philadelphia. Prime members in
eligible zip codes can combine grocery and other shopping into one
seamless experience. Customers can order from over 500,000 items for
same-day and early morning delivery.

The number of Amazon sellers using Fulfillment by Amazon (FBA) grew by
more than 65% year-over-year in 2014. In the fourth quarter, FBA units
represented more than 40% of total third-party units.

Amazon unveiled its 8th generation fulfillment center which utilizes
robotics, vision systems, and almost 20 years worth of software and
mechanical innovations to fulfill customer orders. During the holiday
season, the fulfillment network included more than 15,000 robots in 10
fulfillment centers across the U.S.

Amazon.co.uk announced that Sunday deliveries have grown by more than
4x in the last year as more customers across the U.K. discover the
benefits of receiving orders seven days a week. The increase in Sunday
deliveries has been made possible in large part due to the
introduction of Amazon Logistics, a technology and logistics platform
that empowers independent local, regional, and national delivery
companies across the U.K. to deliver Amazon parcels to customers seven
days a week.

Amazon announced it will open a 46,000 square-foot fashion photography
studio in Shoreditch, London in 2015. The studio will be one of the
largest of its kind in Europe and will provide both on-model and
off-model imaging for Amazon’s rapidly growing European fashion
business.

In 2014, the second year of its operation, Amazon.in emerged as
India’s largest online store. It launched 24 new departments,
increasing selection to over 19 million products, and grew its seller
base exponentially to more than 16,000 sellers.

Amazon launched Amazon Global Store on the China site, www.amazon.cn.
The store provides approximately 200,000 products selected from the
Amazon U.S. website based on the most popular Chinese customer
demands. Chinese customers are now able to enjoy the same quality
product at the same price as U.S. customers, while having a Chinese
shopping experience, local customer service, and direct shipment to
their homes.

With over 515 significant service and feature releases in 2014 (up
more than 80% year-over-year), and over one million active customers,
Amazon Web Services (AWS) continues to grow strongly, with usage
growth close to 90% year-over-year for the fourth quarter.

AWS announced that more than 13,500 attendees from 63 countries
attended AWS re:Invent 2014, its third annual customer and partner
conference.

AWS announced Amazon Aurora, a MySQL-compatible database engine for
Amazon Relational Database Service that combines the speed and
availability of high-end commercial databases with the simplicity and
cost-effectiveness of open source databases. Amazon Aurora provides up
to 5x better performance than the typical MySQL database, availability
as good or better than commercial databases or high-end SANs, and
superior scalability and security — all at one-tenth the cost of
high-end commercial database offerings.

AWS announced AWS Lambda, a compute service that runs developers’ code
in response to events and automatically manages the required compute
resources, making it easy to build and manage applications that
respond quickly to new information.

AWS announced three new services to make it even easier for
enterprises to maintain security, governance, and compliance of their
resources in the AWS cloud: AWS Key Management Service, AWS Config,
and AWS Service Catalog.

AWS announced AWS CodeDeploy, a fully managed, high-scale deployment
service that lets developers quickly and simply automate the process
of deploying and updating applications on Amazon EC2.

AWS announced the Amazon EC2 Container Service, a highly scalable,
high-performance container management service that makes it easy to
run and manage distributed applications using containers on AWS.

AWS has teamed with Pattern Energy Group LP to support the
construction and operation of a 150 megawatt wind farm in Benton
County, Indiana, called the Amazon Wind Farm (Fowler Ridge). It is
expected to generate approximately 500,000 megawatt hours of wind
power annually that will be used to help power both current and future
AWS data centers.

AWS announced Amazon WorkMail, a cloud-based business email and
calendaring service with strong security controls and support for
popular email clients.

Financial Guidance

The following forward-looking statements reflect Amazon.com’s
expectations as of January 29, 2015, and are subject to substantial
uncertainty. Our results are inherently unpredictable and may be
materially affected by many factors, such as fluctuations in foreign
exchange rates, changes in global economic conditions and consumer
spending, world events, the rate of growth of the Internet and online
commerce, and the various factors detailed below.

First Quarter 2015 Guidance

Net sales are expected to be between $20.9 billion and $22.9 billion,
or to grow between 6% and 16% compared with first quarter 2014.

Operating income (loss) is expected to be between $(450) million and
$50 million, compared to $146 million in first quarter 2014.

This guidance includes approximately $450 million for stock-based
compensation and amortization of intangible assets, and it assumes,
among other things, that no additional business acquisitions,
investments, restructurings, or legal settlements are concluded and
that there are no further revisions to stock-based compensation
estimates.

A conference call will be webcast live today at 2 p.m. PT/5 p.m. ET, and
will be available for at least three months at www.amazon.com/ir. This
call will contain forward-looking statements and other material
information regarding the Company’s financial and operating results.

These forward-looking statements are inherently difficult to predict.
Actual results could differ materially for a variety of reasons,
including, in addition to the factors discussed above, the amount that
Amazon.com invests in new business opportunities and the timing of those
investments, the mix of products sold to customers, the mix of net sales
derived from products as compared with services, the extent to which we
owe income taxes, competition, management of growth, potential
fluctuations in operating results, international growth and expansion,
the outcomes of legal proceedings and claims, fulfillment, sortation,
delivery, and data center optimization, risks of inventory management,
seasonality, the degree to which the Company enters into, maintains, and
develops commercial agreements, acquisitions and strategic transactions,
payments risks, and risks of fulfillment throughput and productivity.
Other risks and uncertainties include, among others, risks related to
new products, services, and technologies, system interruptions,
government regulation and taxation, and fraud. In addition, the current
global economic climate amplifies many of these risks. More information
about factors that potentially could affect Amazon.com’s financial
results is included in Amazon.com’s filings with the Securities and
Exchange Commission (“SEC”), including its most recent Annual Report on
Form 10-K and subsequent filings.

Our investor relations website is www.amazon.com/ir and we encourage
investors to use it as a way of easily finding information about us. We
promptly make available on this website, free of charge, the reports
that we file or furnish with the SEC, corporate governance information
(including our Code of Business Conduct and Ethics), and select press
releases and social media postings.

About Amazon

Amazon.com opened on the World Wide Web in July 1995. The company is
guided by four principles: customer obsession rather than competitor
focus, passion for invention, commitment to operational excellence, and
long-term thinking. Customer reviews, 1-Click shopping, personalized
recommendations, Prime, Fulfillment by Amazon, AWS, Kindle Direct
Publishing, Kindle, Fire phone, Fire tablets, and Fire TV are some of
the products and services pioneered by Amazon.

AMAZON.COM, INC.

Consolidated Statements of Cash Flows

(in millions)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2014

2013

2014

2013

(unaudited)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

$

5,258

$

3,872

$

8,658

$

8,084

OPERATING ACTIVITIES:

Net income (loss)

214

239

(241

)

274

Adjustments to reconcile net income (loss) to net cash from
operating activities:

Depreciation of property and equipment, including internal-use
software and website development, and other amortization

1,379

963

4,746

3,253

Stock-based compensation

408

326

1,497

1,134

Other operating expense (income), net

36

40

129

114

Losses (gains) on sales of marketable securities, net

—

—

(3

)

1

Other expense (income), net

78

51

62

166

Deferred income taxes

185

(109

)

(316

)

(156

)

Excess tax benefits from stock-based compensation

115

(78

)

(6

)

(78

)

Changes in operating assets and liabilities:

Inventories

(1,139

)

(1,330

)

(1,193

)

(1,410

)

Accounts receivable, net and other

(1,104

)

(1,239

)

(1,039

)

(846

)

Accounts payable

5,053

5,128

1,759

1,888

Accrued expenses and other

1,451

1,589

706

736

Additions to unearned revenue

1,378

819

4,433

2,691

Amortization of previously unearned revenue

(1,339

)

(821

)

(3,692

)

(2,292

)

Net cash provided by (used in) operating activities

6,715

5,578

6,842

5,475

INVESTING ACTIVITIES:

Purchases of property and equipment, including internal-use software
and website development

(1) Includes sales from non-retail activities, such as AWS sales,
which are included in the North America segment, and advertising
services and our co-branded credit card agreements, which are
included in both segments.

References to customers mean customer accounts, which are unique
e-mail addresses, established either when a customer places an order
or when a customer orders from other sellers on our websites. Customer
accounts exclude certain customers, including customers associated
with certain of our acquisitions, Amazon Payments customers, AWS
customers, and the customers of select companies with whom we have a
technology alliance or marketing and promotional relationship.
Customers are considered active when they have placed an order during
the preceding twelve-month period.

Seller Accounts

References to sellers means seller accounts, which are established
when a seller receives an order from a customer account. Sellers are
considered active when they have received an order from a customer
during the preceding twelve-month period.

AWS Customers

References to AWS customers mean unique AWS customer accounts, which
are unique e-mail addresses that are eligible to use AWS services.
This includes AWS accounts in the AWS free tier. Multiple users
accessing AWS services via one account are counted as a single
account. Customers are considered active when they have had AWS usage
activity during the preceding one-month period.

Units

References to units mean physical and digital units sold (net of
returns and cancellations) by us and sellers at Amazon domains
worldwide — for example www.amazon.com, www.amazon.co.uk,
www.amazon.de, www.amazon.co.jp, www.amazon.fr, www.amazon.ca,
www.amazon.cn, www.amazon.it, www.amazon.es, www.amazon.com.br,
www.amazon.in, www.amazon.com.mx, www.amazon.com.au, www.amazon.nl,
www.diapers.com, www.shopbop.com and www.zappos.com — as well as
Amazon-owned items sold through non-Amazon domains. Units sold are
paid units and do not include units associated with certain
acquisitions, rental businesses, web services, or advertising
businesses, or Amazon gift certificates.